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Halo Labs Reports Record Third Quarter 2020 Financial Results Reports Positive EBITDA and Operating Cash Flow

·12 min read

This news release constitutes a "designated news release" for the purposes of the Company's prospectus supplement dated September 16, 2020 to its short form base shelf prospectus dated September 2, 2020.

/NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES/

All figures in USD unless stated otherwise

TORONTO, Nov. 13, 2020 /CNW/ - Halo Labs Inc. ("Halo" or the "Company") today announced its financial and operational results for the three months ended September 30, 2020. Halo is pleased to report total revenues exceeding $6.8 million, resulting in operating income of approximately $1.0 million for the quarter ended September 30, 2020.

www.halocanna.com (CNW Group/Halo Labs Inc.)
www.halocanna.com (CNW Group/Halo Labs Inc.)

Third Quarter Highlights:

Revenues in the three months ended September 30, 2020 exceeded $6.8 million, a 30.3% increase, when compared to the three months ended June 30, 2020. Revenues continue to increase quarter over quarter as a result of a strong recovery at Coastal Harvest, Inc. in Cathedral City, California ("Coastal Harvest") and a near doubling of revenues at Mendo Distribution & Transportation ("MDT"). Since the fourth quarter of 2019, revenues have increased every calendar quarter.

Gross profits were approximately $4.6 million (three months ended September 30, 2019: $2.9 million). The gross margin was 67.1% (three months ended September 30, 2019: 40.6%), as a result of further improvement in gross margins at ANM Inc. to 44.3% (three months ended September 30, 2019: 26.1%) and a gain in the fair value of biological assets. The gross margin at Coastal Harvest recovered to 21.1% adjusted for an inventory markdown (three months ended September 30, 2019: 7.3%) and 25.1% at MDT (three months ended September 30, 2019: NA).

Earnings before interest, tax and depreciation ("EBITDA") was approximately $0.9 million (three months ended September 30, 2019: negative $5.0 million) and was positive for the first time in the Company's history.1 In the three months ended September 30, 2020, cash generated from operations was $0.2 million. Total cash inflow was $0.8 million.

During the three months ended September 30, 2020, the Company completed the acquisitions of Ukiah Ventures Inc. ("UVI"), Bophelo Bioscience Wellness Pty. Ltd. ("Bophelo"), Crimson & Black LLC ("Crimson & Black"), a majority interest in LKJ11 LLC (the "North Hollywood Dispensary") and a 25% interest in Feel Better LLC ("FlowerShop"). Once Bophelo receives a Good Agricultural and Collection Practices ("GACP") certification, its biological assets can be included in the Company's consolidated figures which are expected to further improve the Company's financial results. In addition, UVI provides Halo with a 30,000 square foot building that will be used for both drying and curing, as well as an indoor grow that is currently under construction and is expected to provide Halo with a source of quality biomass in California.

____________________________

1 Please refer to "Non-IFRS Financial Measures"

As at September 30, 2020, the Company had cash available in the amount of $2.3 million and working capital of approximately $13.1 million.

Summary consolidated statement of income - expressed in US dollars


For the 3 months ending:

For the 9 months ending:


September 30, 2020

September 30, 2019

September 30, 2020

September 30, 2019






Revenue

$

6,829,782

$

7,150,557

$

16,521,841

$

25,421,072

Reported gross profit

4,585,453

2,903,770

5,440,148

6,601,800

Gross margin

67.1%

40.6%

32.9%

26.0%






Operating expenses

(3,685,817)

(7,924,134)

(15,889,680)

(16,686,798)

Operating income (loss)

899,636

(5,020,364)

(10,449,532)

(10,084,998)






Net loss

(3,167,055)

(5,887,772)

(18,045,225)

(12,983,442)

Comprehensive loss

(2,640,685)

(6,309,689)

(17,814,516)

(13,142,875)






Net loss per share (basic and diluted)

$

(0.01)

$

(0.03)

$

(0.04)

$

(0.08)






Full details of the financial reports and operating results for the quarter ended September 30, 2020, are described in the Company's Condensed Interim Consolidated Financial Statements with accompanying notes and related management's discussion and analysis, available under the Company's profile on SEDAR at www.sedar.com.

Management Commentary:

Kiran Sidhu, Chief Executive Officer, commented: "I could not be more pleased with the results that our team delivered during the third quarter of 2020 which was overshadowed by a global pandemic and economic uncertainty. For the first time in the Company's history, quarterly operating income was positive, and cash was generated from operations. Meanwhile we continue to roll-out our vertical integration strategy across operations in a number of regions."

The Company closed the acquisitions of Crimson & Black, a majority interest in the North Hollywood Dispensary and a 25% interest in FlowerShop™. These acquisitions provide the Company with a footprint in the lucrative retail market in California.

On July 17, 2020, the Company announced that it had completed the acquisition of Bophelo. Subsequent to the closing of the acquisition, Bophelo entered into a $30.0 million offtake agreement with Medcan Ltd. for the sale of bulk cannabis biomass, primarily into the European market. The contract specifies initial deliveries of up to 10,000 kilograms.

The Company acquired all of the issued and outstanding shares of UVI in exchange for securities of the Company, and the Company entered into a letter of intent to establish a joint venture and strategic alliance with Terphogz, LLC, a renowned cannabis breeding group responsible for the famous Zkittlez™ variety of cannabis strains. The joint venture is expected to establish and operate a state and locally licensed commercial cannabis cultivation facility at UVI.

On September 28, 2020, the Company announced that its wholly owned subsidiary PSG Coastal Holdings, LLC together with Green Matter Holding, Inc. founded a real estate holding company, each with 50% ownership. The newly formed company, Lake County Natural Health LLC, completed the purchase of Bar X Ranch in Lake County, which will be used for cultivation and is expected to enable Halo to have consistent and quality supply in California.

On November 10, 2020, the Company announced that is had acquired Canmart Ltd. ("Canmart"), a licensed importer and distributor of cannabis-based products for medicinal use in the United Kingdom. Canmart completes the Company's seed-to-sale international vertical platform, whereby cannabis produced by Bophelo in Lesotho can be imported into Europe and the United Kingdom.

Earnings Call

Halo will host a conference call on Monday, November 16th, 2020 to discuss Q3 2020 financial and operational results. Investors can register for the discussion and Q&A with Kiran Sidhu, the Chief Executive Officer, and Philip Van Den Berg, the Chief Financial Officer, at 4:15 p.m. EST / 1:15 p.m. PDT below:

Conference ID: 9456385
Leader Toll-Free Dial-In Number: (877) 227-1074
Leader International Dial-In Number: +1 2363892109

Leaderview:
http://www.leaderview.com
Conference ID: 9456385
Web PIN: 0984

Germany , Berlin 30224030809 (local)
Germany 08000010030 (toll-free)
United Kingdom , London 02036923759 (local)
United Kingdom 08003765769 (toll-free)

About Halo Labs Inc.

Halo is a leading, vertically-integrated cannabis company that cultivates, extracts, manufactures and distributes quality cannabis flower, oils, and concentrates, and has sold approximately six million grams of oils and concentrates since inception. Halo continues to scale efficiently, partnering with trustworthy leaders in the industry, who value their operational expertise in bringing top-tier products to market. Current growth includes expansion in key markets in the United States, United Kingdom and Africa, with planned geographic expansion into Canadian markets. With a consumer-centric focus, Halo markets value-driven, branded, and private-label products across multiple product categories. The Company also has acquired a range software development assets, such as the technology platforms CannPOS, Cannalift, and more recently signed a deal to acquire CannaFeels. Halo also owns the inhalation technology, Accudab.

Halo is led by a strong, diverse and innovative management team, with deep industry knowledge and blue-chip experience. The Company is currently operating in the United States in California, Oregon, and Nevada. Internationally, the Company is currently cultivating cannabis at Bophelo Bioscience & Wellness (Pty) Ltd, in Lesotho under a 200-hectare license and has acquired CBPM importation and distribution licensing in the United Kingdom via cannabis supplier, Canmart.

For further information regarding Halo, see Halo's disclosure documents on SEDAR at www.sedar.com.

Non-IFRS Financial Measures

EBITDA is a non-IFRS financial measure that the Company uses to assess its operating performance and does not have any standardized meaning prescribed by IFRS. EBITDA is defined as net earnings (loss) before net finance costs, income tax expense (benefit) and depreciation and amortization expense. EBITDA is provided to assist management and investors in determining the Company's operating performance. The Company also believes that securities analysts, investors and other interested parties frequently use this non-IFRS measure in the evaluation of companies, many of which present similar metrics when reporting their results. As other companies may calculate this non-IFRS measure differently than the Company, this metric may not be comparable to similarly titled measures reported by other companies. For a reconciliation of EBITDA please refer to "Non-IFRS Measures" in the Company's management discussion and analysis for the three and nine months ended September 30, 2020.

Cautionary Note Regarding Forward-Looking Information and Statements

This press release contains certain "forward-looking information" within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only Halo's beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of Halo's control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or may contain statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "will continue", "will occur" or "will be achieved". The forward-looking information and forward-looking statements contained herein include, but are not limited to, the expected receipt by Bophelo of its GACP certification, the expected impact of Bophelo's biological assets on the Company's financial results, the intended use of the UVI facilities, the ability of the UVI facilities to provide the Company with a quality source of biomass, the expected use of the Bar X Ranch in Lake County and its ability to supply Halo with quality cannabis.

By identifying such information and statements in this manner, Halo is alerting the reader that such information and statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from those expressed or implied by such information and statements. In addition, in connection with the forward-looking information and forward-looking statements contained in this press release, Halo has made certain assumptions. Although Halo believes that the assumptions and factors used in preparing, and the expectations contained in, the forward-looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements. Among others, the key factors that could cause actual results to differ materially from those projected in the forward-looking information and statements are the following: unexpected delays in the GACP certification process as a result of the COVID-19 pandemic; changes in accounting policies (including the recognition of biological assets); delays in the ability for the Company to obtain the necessary licenses and permits to begin cultivation at the UVI facility; unforeseen circumstances (including natural disasters) that could prevent UVI from supplying the Company with biomass; delays in the ability of the Company to obtain certain regulatory approvals for the Bar X Ranch; negative results experienced by the Company as a result of general economic conditions or the ongoing COVID-19 pandemic; delays in the ability of the Company to obtain certain regulatory approvals; unforeseen delays or costs in the completion of the Company's construction projects; adverse changes to demand for cannabis products; ongoing projects by competitors that may impact the relative size of the Company's growing operation; adverse changes in applicable laws; adverse changes in the application or enforcement of current laws; increasing costs of compliance with extensive government regulation; changes in general economic, business and political conditions, including changes in the financial markets; risks related to licensing, including the ability to obtain the requisite licenses or renew existing licenses for the Company's proposed operations; dependence upon third party service providers, skilled labor and other key inputs; and the other risks disclosed in the Company's annual information form dated April 16, 2020 and available on the Company's profile at www.sedar.com. Should one or more of these risks, uncertainties or other factors materialize, or should assumptions underlying the forward-looking information or statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected.

The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and Halo does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws. All subsequent written and oral forward-looking information and statements attributable to Halo or persons acting on its behalf is expressly qualified in its entirety by this notice.

SOURCE Halo Labs Inc.

Cision
Cision

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